WAVE 1
Wave 1 is the first impulse wave of the five-wave structure. Wave 1 is the beginning of the trend movement. It is generally accompanied by a strong reading in the momentum oscillator, especially when prices have undergone a prolonged correction. Wave 1 is used to project the target level of Wave 3. Extension of the wave means there is a subdivision of the wave into another five-wave structure. When Wave 1 is not extended, the target level of Wave 3 is normally either (1) 1.618 of Wave 1 measured from the low of Wave 2, or (2) equal to Wave 1. When Wave 1 is extended, the target of Wave 3 is normally about 0.618 of Wave 1 measured from the low of Wave 2. (See Figure 4.3.)
FIGURE 4.3 Projection of Wave (3) is 1.618 of Wave (1) measured from the low of Wave (2).
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